We hope you enjoy a happy and safe holiday season!
Thanks to tighter mortgage qualification rules and higher-priced real estate—particularly in the greater Vancouver and Toronto areas—it’s not always easy to qualify for a mortgage on your own merits.
You may very well have a great job, a decent income, a husky down payment and perfect credit, but that still may not be enough.
When a lender crunches the numbers, their calculations may indicate too much of your income is needed to service core homeownership expenses such as your mortgage payment, property taxes, heating and condo maintenance fees (if applicable).
In mortgage-speak, this means your debt service ratios are too high and you will need some extra help to qualify. But you do have options.
A mortgage co-signer can come in handy for many reasons, including when applicants have a soft or blemished credit history. But these days, it seems insufficient income supporting the mortgage application is the primary culprit.
We naturally tend to think of co-signers as parents. But there are also instances where children co-sign for their retired/unemployed parents. Siblings and spouses often help out too. It’s also possible for more than one person to co-sign a mortgage. A co-signer is likely to be approved when the lender is satisfied he/she will help lessen the risk associated with loan repayment.
When you bring a co-signer into the picture, you are also taking their entire personal finances into consideration. It’s not just a simple matter of checking their credit.
Your mortgage lender is going to need a full application from them in order to grasp their financial picture, including information on all properties they own, any debts they are servicing and all of their own housing obligations. Your co-signer will go through the wringer much like you have.
The lender’s focus is mainly centred around a co-signer’s income coupled with a decent credit history. Some people think that if they have tons of equity in their home (high net worth) they will be great co-signers. But if they are primarily relying on CPP and OAS while living mortgage free, this is not going to help you qualify for a mortgage.
The best co-signer will offer strengths you currently lack when filling out a mortgage application on your own. For instance, if your income is preventing you from qualifying, find a co-signer with strong income. Or, if your issue is insufficient credit, bring a co-signer on board who has healthy credit.
There are typically two different ways a co-signer can take shape:
“The cleanest way to deal with these situations is for the third party (which is typically a parent) to guarantee the main applicant’s mortgage debt obligation,” Mohan says. “This does not require the guarantor to appear on the title to the property, and so it prevents most later complications.”
Following are five key suggestions from Mohan:
The International Monetary Fund (IMF) has weighed in on Canada’s housing market, saying it would be “ill-advised” to stimulate housing activity by easing the mortgage stress test.
In a report released by IMF staff this week following an official visit to Canada, the IMF noted the government has been under pressure to “ease macroprudential policy or introduce new initiatives” that would support increased housing activity.
“This would be ill-advised, as household debt remains high and a gradual slowdown in the housing market is desirable to reduce vulnerabilities,” the report reads.
Last week, Conservative Party leader Andrew Scheer said he would eliminate the stress test on mortgage switches at renewal, and consider re-introducing 30-year amortizations for insured mortgages if his party is elected in October.
Research released last month by TD Economics estimated that the B-20 regulations (stress test) resulted in 40,000 fewer home sales in 2018. Similar research from Benjamin Tal, CIBC’s Deputy Chief Economist, estimated the stress test is responsible for an 8% decline in new mortgages started in 2018, translating into a $15 billion drop in lending activity.
Meanwhile on Thursday, CMHC CEO Evan Siddall said the stress test is “doing what it is supposed to do,” he wrote in a letter dated to the Standing Committee on Finance.
“The mortgage stress test is exactly the kind of policy we need to protect our economy,” Siddall wrote, saying calls from industry groups such as Mortgage Professionals Canada, the Canadian Home Builders Association and the Ontario Real Estate Association to ease the stress test would add to housing demand and price inflation of 1-2% in the larger cities.
“My job is to advise you against this reckless myopia and protect our economy from potentially tragic consequences,” he said.
Mortgage lenders are less likely to approve same-sex couples according to a new study.
Iowa State University's Ivy College of Business studied US mortgage application data from 1990-2015 and found approval rates for same-sex couples were between 3% and 8% lower than for heterosexual couples.
When more detail about applicants' work history and credit worthiness was included in a subset study, same-sex couples were 73% less likely to be approved.
Even for those that were offered a mortgage, rates and fees were higher.
"Lenders can justify higher fees, if there is greater risk," said Lei Gao, assistant professor of finance. "We found nothing to indicate that's the case. In fact, our findings weakly suggest same-sex borrowers may perform better."
There is requirement for borrowers to disclose their sexual orientation on mortgage applications and the Fair Housing and Equal Credit Opportunity acts prohibit discrimination. For the study, same-sex couples were identified as co-applicants of the same gender.
"Policymakers need to guarantee same-sex couples have equal access to credit," said co-author Hua Sun. "Using our framework, credit monitoring agencies also can take steps to investigate unfair lending practices."
The Internet of things, or IoT, is all about connecting smart devices for people’s comfort, convenience and efficiency. What began a few years ago as mostly a technical phenomenon is today a social trend: connected devices change the way we behave, live, interact and think of our privacy and safety.
IoT is here to stay. The research firm Gartner says that 2019 is the year in which IoT adoption becomes mainstream, with practically most devices and gadgets becoming connected.
For example, the number of wearable devices will increase 25.8% to 225 million in 2019.
Global shipments of wearable devices are forecast to increase by 25.8% year over year to $225 million (GBP 176.3 million) in 2019, according to the latest figures from Gartner. The research firm also predicted that that the end-user spending on wearable devices will reach to $42 billion (GBP 32.9 million) in 2019.
As for smart speakers such as the Amazon Echo and Google Home, they will be the fastest rising category, with a five-year CAGR of 39.1%.
IoT includes all connected devices from smart cars, kitchen appliances, surveillance cameras, locks and doorbells, light bulbs, heat sensors to smart toys and baby monitors.
Gartner predicts the number of connected devices will exceed 50 billion by 2020.
What could these numbers (and IoT statistics) mean for you?
The bigger the smart home market gets, the greater the chance that smart gadgets get into your home, one by one. You start living in a smart home without even thinking of it that way. But, as long as you have devices that ”talk” to you or each other, that connect to your wifi and have an app to control them, you are there. New sensors, new algorithms and new experiences will make your life more connected, more productive and more comfortable.
Even if your devices are smarter, it’s still your job to make sure they’re safe.
2018 was the year in which people started to pay attention to “data protection” and privacy. Beyond the legal concerns, people want their privacy to be respected, and they started to push for a change in businesses approach of using their data. Although this problem is far from being solved, people are at least aware of it.
Why would anyone hack your family?
Another challenge that IoT brings for this year is safety. Connecting your devices to the internet creates a gateway into your home and family. Like a real door, it can be used by people who want to force their way in – and many of the smart devices available aren’t even protected by security software and thus are vulnerable to hackers.
They want to take control of your devices to steal your money, use your identity, spy on you or use the processing power of your fancy smart appliance to take down web targets.
You may have read news about IoT devices being infected and exploited, but never thought it could happen to you.
What you can do to secure your smart home
OTTAWA _ On the eve of a federal election this fall, the Liberal government is looking to help more Canadians buy their first homes by picking up a portion of their mortgage costs and increasing the amount they can borrow from their retirement savings for a down payment.
Helping people enter the housing market has been a growing preoccupation for the Liberals ever since they were elected in 2015, with soaring real-estate prices in some of Canada's largest cities putting home ownership beyond the reach of many.
An estimated 1.6 million Canadian households are considered in ``core housing need,'' meaning people who are living in places that are either too expensive or don't suit their needs.
The means-tested incentive the Liberals unveiled Tuesday would only be available to
households with incomes under $120,000 _ roughly $50,000 more than the median household income as calculated by Statistics Canada _ and on mortgages no more than four times the household's total income.
Eligible buyers would see the government pick up part of the costs of their mortgages to lower their monthly payments, with the amount of help determined by their incomes and whether they're buying an existing or newly built home.
The government also plans to raise the maximum amount a first-time buyer can withdraw from an RRSP: $35,000, up from $25,000. And while the program has long been restricted to new would-be homeowners, those who are recovering from the breakup of a marriage or common-law relationship would also be allowed to take part.
The measure, expected to cost $1.25 billion over three years beginning this fiscal year, would target Canadians ``that face legitimate challenges entering housing markets'' after qualifying for a mortgage, the budget document says. An additional $100 million would flow to the Canada Mortgage and Housing Corporation to help organizations that already provide the so-called ``shared equity mortgages.''
The government would recoup its costs when the house is sold, although the budget document isn't clear what would happen if the home is sold for a loss.
The program, some details of which are yet to be finalized, is part of a tranche of spending that includes establishing a national expert panel on housing supply and affordability, better data collection, and $300 million for a contest to encourage cities to come up with new ways of expanding housing stock.
The new measures could increase the annual number of new homebuyers nationally to 140,000 from 100,000 by lowering monthly payments without creating higher household debt loads, said Finance Minister Bill Morneau, who was confident the measures won't cause a spike in housing prices.
``We're recognizing that it is challenging for people in the housing market; it's a real issue, but what we've done is we've carefully looked at what's the best way to deal with that issue,'' Morneau told a news conference.
``It's not going to make an impact on the overall market from a pricing standpoint, meaning people are actually going to be better off, more optimism in terms of housing, and it's the reason we're very excited about this measure.''
Economists and experts had been concerned that Morneau's focus on helping millennials, in particular, get footholds in the market could juice home prices after years of trying to cool demand in places like Toronto and Vancouver. Federal efforts, such as a new financial ``stress test'' to make sure a buyer can afford a mortgage, have slowed prices from where they might have been.
Scotiabank economist Marc Desormeaux said the Liberals opted for a relatively modest measure, considering the options they have.
``This is providing additional support for individuals who have already qualified for homes, helps them relieve some of their monthly payments once they've qualified for a mortgage and entered into the contract,'' Desormeaux said.
``The concerns about stoking demand from some of these measures aren't concerns that we would raise at this time.''
What the measures should do is increase supply _ one of the measure's stated goals. The government plans to cover five per cent of the cost of the purchase of an existing home and 10 per cent of a new build, hoping to ``encourage the home construction needed to address some of the housing supply shortages'' across the country, the budget document says.
Mathieu Laberge, an expert with Deloitte, said the measures appear to target people who would be willing to rent or buy smaller condominium units, for example, outside a major urban centre.
``It may shift the decision-making of some buyers in larger cities,'' said Laberge, a former policy adviser to Social Development Minister Jean-Yves Duclos. ``You're changing the relevant price between rental and home ownership in those areas, like the immediate suburbs of, for example, Vancouver and Toronto, which is a way to provide more options to households that would otherwise be priced out of the market.''
Tuesday's budget also includes $10 billion more for a program to fund the construction of new rental units _ the third time the Liberals have expanded the program, which aims to create 14,000 units over 10 years and now carries a $50-billion price tag.
The Canadian Press-Jordan Press
Vancouver, BC – March 13, 2019. The British Columbia Real Estate Association (BCREA) reports that a total of 4,533 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in February, a decline of 27 per cent from the same month last year. The average MLS® residential price in the province was $678,625, a decline of 9.3 per cent from February 2018.
Total sales dollar volume was $3.08 billion, a 33.8 per cent decline from the same month last year.
“Prospective homebuyers continue to be sidelined by the mortgage stress test,” said Brendon Ogmundson, BCREA Deputy Chief Economist. “As a consequence, and despite a strong BC labour market, sales remained slow in February.”
Total MLS® residential active listings increased 36.5 per cent to 30,891 units compared to the same month last year. The ratio of sales to active residential listings declined from 27.4 per cent to 14.7 per cent over the same period.
“Falling mortgage rates should provide some relief for homebuyers, providing a small boost to affordability heading into the spring,” added Ogmundson.
Master-planned communities have the obvious advantage of elaborate planning that standalone developments don’t, and that makes them superior investments.
“Master-planned communities have the advantage in that you know how the community will change over time,” said Brad Jones, VP of development at Wesgroup in Vancouver. “You know how the community will grow and which retailers are coming on board. There are also parks, schools and a clear ability to understand how your neighbourhood, and your investment, will change over time.”
Wesgroup is in the midst of developing River District, the largest master-planned community in Vancouver, that has 54 development parcels over approximately 130 acres. In total, the community expects about 15,000 residents will be spread across 7,000 units of housing.
“River District has the unique advantage of one company doing all the buildings, doing all the master-planning work and owning all the retail and commercial space,” said Jones. “Your investment is going to be looked after by us because we’re looking after our own investment, too. We’re buying into the future of the community, like every buyer is, rather than just a few buildings. We’re the landlord for the grocery store, the bank and the liquor store. We’re looking after the community’s reputation by building and thinking long-term.”
There are three major phases, the second of which is under construction to build out what Jones calls the town centre, where roughly 250,000 square feet of retail is going, as well as a condominium called Mode. The mixed-use project will also have schools and a daycare, which is sure to help valuations surge, added Jones.
“The community plan includes an elementary school, a secondary school, and a community centre.”
The development’s demography will be as diverse as its offerings. Jones says growing families, downsizers, and everyone in between, are already moving into River District. Another one of its draws is that it’s nestled close to downtown, Richmond, Burnaby, and other employment hubs in the region.
“That gives us a broad buyer and resident group to pull from,” said Jones. “We’re focused on the big picture and ensuring that every building contributes to the whole rather than developing one or two buildings, then leaving. It is important to us that the housing is fully occupied, just as it’s important to us that the retail components are fully occupied with the right tenants. It’s about the big picture.”
Despite housing affordability concerns across the country, homeownership rates in Canada remain among some of the highest in the world.
As of 2016 (the most recent data available), Canada boasts an overall homeownership rate of 67.8%, down slightly from a peak of 69% in 2011, according to research from RBC Economic Research. Comparatively, the U.S. has a homeownership rate of 63.4%.
Even for those aged 35 and under, more than 40% of households own their own homes.
“We take issue with the notion that Canada has a homeownership problem,” reads the RBC report. “…the proportion of all Canadian households who own a home is one of the highest among advanced economies.”
The report cautions the federal government to “tread carefully” when considering measures to address the issue of affordability.
It argues that those measures—such as relaxing the mortgage stress test, extending amortizations for insured mortgages or increasing the allowable RRSP takeout for first-time homebuyers—would only bring short-term relief to homeowners and do nothing to address the issue of high household debt.
RBC adds that the measures focus on boosting demand and increasing buyers’ purchasing power, which on their own would likely inflate prices and lead to a further deterioration of affordability down the road.
“[Those measures alone] do nothing to address what we believe is the root of Canada’s housing woes: gaps in the mix of housing options in some of Canada’s larger markets,” reads the report. “In our view, the longer-lasting remedy to Canada’s affordability crisis lies first and foremost on the supply side of the equation.”
It adds that solving supply isn’t the federal government’s responsibility alone, and calls on all levels of government to work together to develop solutions.
“What millennials in Vancouver and Toronto really need is more inventory of homes they can afford, and a better mix of housing options—be it to own or rent,” the report says.
“At the very least, the collective goal should be to remove barriers (regulatory, administrative or otherwise) inhibiting home developers and builders to respond quickly to the demand for new housing—especially when that demand is rising rapidly.”
via Steve Huebl - Canadian Mortgage Trends
“Extending the amortization period on insured mortgages, easing the stress test introduced last year or increasing the $750 tax credit for first-time buyers might encourage more millennials to purchase a condo, the only type of property within financial reach,” he added. “But since most millennials ultimately aspire to purchase of a single-family home, it’s worthwhile asking whether Canada needs any more condos right now.”
“Attempts by urban planners and policy-makers to condition Canadians into accepting condo living as a permanent state in life have not stopped millennials from dreaming the suburban dream,”